Small and medium-sized enterprises are the backbone of Kenya’s economy, creating both formal and informal job opportunities and driving innovation across multiple sectors. However, most SMEs rely on informal agreements and understanding when engaging employees. This approach may feel practical and convenient, but it creates legal and operational risks.
The Legal Analysis
Section 9 of the Kenya Employment Act requires that any contract of service for a period
amounting to three months or more, or for work that cannot reasonably be completed within that
period, shall be in writing. The duty to prepare the contract rests with the employer, who must also
ensure that the employee consents to it by signature or by thumbprint. Section 10 of the Act lists the
particulars that must appear in that written contract.
The practical implications of Sections 9 and 10 shows up in litigation. Where an employer fails to
produce a written contract or written particulars in legal proceedings, the burden of proving or
disproving any alleged term of employment shifts to the employer. In practice, this means that if an
employee later claims against the employer whether rightly or wrongly, and the employer has no
written record, the law does not require the employee to prove it. Instead, it asks the employer to
disprove it. Kenyan Courts have time and again upheld this principle, as was seen in the case of
Jackson Muiruri Wathigo t/a Murtown Supermarket v Lilian Mutune [2021] KECA 388 (KLR
Advantages of a written Contracts of Employment
A well-drafted contract does more than satisfy the provisions of the law. It provides clarity; records
essential terms so that both parties understand their obligations and expectations, thus reducing
misunderstandings that commonly lead to disputes. It provides legal protection; clearly outlines the
disciplinary, and grievance procedures, and safeguards that protect business assets. It provides
evidential value, by providing a point of reference should a dispute arise.
Conclusion and Recommendation
Many SME owners overlook formal contracts because the business is “small” or because relationship feel personal and trusting. Trust is valuable, but it is not a substitute for clarity. Disputes rarely arise when everything is going well. They surface when performance declines, the business needs to make changes, or personal relationships sour. At that point the absence of a written record becomes an inconvenience, that more often than not squarely falls on the employer.
A written contract of employment protects the employee just as much as it protects the business. For a growing SME, providing a written contract when engaging an employee is considerably less
expensive than the dispute it prevents.